Obama vs. Romney – Who cuts Medicare?

Since Mitt Romney announced his selection for Vice President nearly one week ago, the campaign has scrambled to explain how Romney’s own policy proposals compare to his nominee’s widely publicized and CBO-scored “Path to Prosperity” – the budget written by Paul Ryan and recently passed by the House.

In his Path to Prosperity, Paul Ryan lays out a budget plan that would enable private health insurers to compete with traditional Medicare by providing seniors with “premium support,” otherwise known as vouchers to select a plan from a Medicare exchange.

If that sounds familiar, it’s because it’s not very different from Obama’s plan to expand health care to everyone outside of the senior population (seniors are automatically enrolled in Medicare at age 65). Obamacarecreated state-operated health insurance exchanges and provides subsidies to purchase a plan for individuals earning up to 400% of the poverty level, or about $92k/year for a family of four.

Obama’s proposed “Public Option,” which would have looked very much like traditional Medicare and would have served to compete with the more expensive private plans was attacked as a vast, government-wide takeover of health care by people like Paul Ryan and subsequently removed from Obama’s health care law.

Ryan’s initial budget plan completely replaced traditional Medicare so its inclusion in his latest iteration is no doubt an attempt to neutralize democratic attacks against his desire to dismantle traditional Medicare, but does its inclusion drastically alter the outcomes?

Both Obama and Ryan pin the growth rate of Medicare at GDP+0.5%, and up until this week, both included $700 billion of reductions in the expected growth rate of Medicare. The Romney campaign realized they could not continue to use that attack line against Obama and opted instead to denounce pieces of the budget that Ryan wrote, the House passed, and Romney praised as “marvelous” to broaden their appeal to voters. It’s not clear whether Romney’s advisors considered the policy consequences of that decision.

Medicare Miscalculations

Prior to the Romney/Ryan $700 billion flip-flop, Obama did not have a significant edge on predicted future consequences for Medicare. The CBO admitted uncertainty in making such predictions, noting that both Ryan and Obama’s plans could result in “reduced access to health care; diminished quality of care; increased efficiency of health care delivery; less investment in new, high-cost technologies; or some combination of those outcomes. In addition, beneficiaries might face higher costs, which could in turn reinforce some of the other effects.”

Elimination of benefits for Medicare beneficiaries: Romney has consistently claimed that he would repeal Obama’s entire plan, which includes free screenings for preventive care and re-opens the prescription “donut hole.”

Increased premiums: Medicare Advantage (Medicare Part C) and Medicare Part B premiums would increase for 70% of Medicare enrollees.

Insolvency: Savings achieved through the ACA extend Medicare’s solvency by ten years, which would be shortened upon repeal.

Beyond these issues, the Romney/Ryan plan for Medicare is only applicable to those under age 55 revealing how deeply unpopular it is among those most affected by it. The Ryan plan also increases the age of eligibility to 67 over a period of time.

Repeal of the ACA would enable insurers to go back to denying coverage for pre-existing conditions and would not allow students to remain on their parent’s plans through 26 years old. Most importantly, the Romney/Ryan plan does not provide a mechanism for guaranteeing near universal coverage – a necessary staple for spreading risk and bringing down overall health care premiums.

Reductions in Future Medicare Growth

When republicans insist that Obama “cuts” $700 billion from Medicare, they are not telling the truth. As Ezra Klein explains, the basic strategy of the ACA has three components: 1) Define quality; 2) Determine payment models that incentivize quality over volume; 3) Empower Medicare with the tools to encourage quality care.

The Independent Payment Advisory Board – known in conservative circles as a “death panel” – is empowered by the ACA to do such things as cut hospital reimbursements if patients are readmitted too often, collect data on quality (if you don’t already, you will soon have an individual electronic health record), and use that data to incentivize the purchase of goods and services with an actual track record of effectiveness. Scary stuff, I know. In addition, the ACAreduces subsidies to private insurers as part of Medicare Advantage, which has already resulted in lower premiums for seniors, as cited above. Together, these actions are expected to reduce the future growth in Medicare spending by $700 billion – there is no cut to benefits.

Why does it matter?

The August prior to an election has been appropriately coined “silly season” and if you’ve been paying attention to the political ads, you will need no further explanation. Since democrats appear poised to use the same tactics that republicans have been so successful beating them with in the past, the disinformation is likely to be mind-boggling.

Medicare will be a defining issue for this election and the more you know about both plans, the better equipped you are to determine whose plan you support. It took hours to filter through information as recent as two days ago that is no longer relevant to the debate so you would be forgiven if you were confused over whose plan does what.

The seeming disorganization of the Romney campaign should be unsettling for supporters – did Romney’s advisor’s really think through the repercussions of their Medicare “plan”? It mostly just breaks the system that has been so popular with seniors for decades and replaces it with a hope and a prayer in the free market. Up until now, that same market has had a poor record of holding down costs.

Paul Ryan has said to opponents of his Medicare plan to “bring it on” – you can bet that the Obama campaign will oblige him.